According to the Universities and Colleges Admissions Service (UCAS), as of this March, applications to UK universities were down 3.4 per cent on last year, the first drop in six years. From this September, universities and colleges were permitted to charge tuition fees of up to £3,000 per year for new students, and most institutions are charging the full amount. The question from commentators and opposition politicians is whether these two facts are connected.

The key change is that while under the previous system students paid for tuition up front, the new fees can be paid off following graduation, once yearly income reaches £15,000. This is achieved by means of financial assistance. A non-means-tested fee loan is available to all graduates. In addition, a partly means-tested loan has been introduced to cover living costs. A further grant of up to £2,700 is available to assist students from low-income households, alongside a raft of new bursaries offered by colleges and local authorities.

47 per cent of sixth form students questioned in a survey by the Universities Marketing Forum stated that inability to afford fees was either "quite likely" or "very likely" to deter them from applying. "Fees are one of the things that put me off," says Danny Parr, 19, who left school after performing exceptionally in AS Levels. "Knowing how much debt I'd end up in for a course I may end up disliking would depress me."

However, the drop in applications appears to mirror the increase shown in last year's figures. This could be interpreted as school and college leavers neglecting gap years in order to take advantage of the final year of the old system.

As Alan Johnson, education secretary and architect of the new tuition fee system points out, in 2010 a graduate earning £18,000 a year will be paying back their loan at a rate of just £5.20 a week and "by that time it's probably the price of a pint." Given that over their lifetime graduates are said to earn, on average, £150,000 more than their non-university educated contemporaries, in effect new students will be in a better financial position than their predecessors.

However, there is controversy over the variable nature of fees. The current legislation retains the £3,000 price cap until 2010, but there is pressure from universities for these restrictions to be lifted. If institutions can charge varying amounts for admission, the allegation is that a situation in which elite institutions imposing higher fees will accentuate a social class gap in Higher Education, already described by former education secretary Charles Clarke as "a national disgrace".

Key to the Government's legislation is the idea that a more market-orientated system must be introduced in order to allow British universities to compete on a global playing field, alongside the US Ivy League colleges. This injects the Higher Education sector with a commercialisation that many interest groups, such as the National Union of Students (NUS), find disquieting. The Government's message is that, viewed in perspective, the new system should encourage rather than deter students from all backgrounds from applying to university.